Officials with the world's largest commercial real estate company have represented both the U.S. Postal Service and buyers of postal properties on at least 10 occasions, a conflict of interest that should be barred, according to a government watchdog.
The agreement allowing Los Angeles-based CBRE Group to profit on both ends of postal property sales "could lead to financial loss to the Postal Service and decrease public trust in the Postal Service's brand," the postal service's inspector general has warned the agency. The IG sent out an "alert" about the issue to USPS management last month.
But postal officials refuse to end the practice, with one official denying any conflict of interest had been found.
CBRE is currently the exclusive listing agent for all of the postal service's surplus properties. Formerly known as CB Richard Ellis, the firm describes itself on its website as "the world's premier, full-service real estate services company." It was ranked at No. 387 in last year's Fortune 500 and did $7 billion in business.
A CBRE spokesman told the Washington Examiner that dual representation “is a common practice in our industry.” Governmental authorities in all states permit it, the spokesman said, and when the firm represents both sides, “that fact is disclosed promptly to USPS in advance for their consideration and consent.”
The California Democrat's husband, investment banker Richard Blum, is CBRE's board chairman, and his investment firm, Blum Capital Partners, owns 15 million shares of the publicly traded company, valued at an estimated $4 billion. Blum Capital is also CBRE's fifth-largest institutional shareholder, owning almost five percent of the company as of Dec. 31, according to corporate disclosures.
A Feinstein spokesman told the San Francisco Chronicle last year that she “is not involved with and does not discuss any of her husband's business decisions with him. Her husband's holdings are his separate personal property. Senator Feinstein's assets are held in a blind trust.”
Feinstein's most recent financial disclosure form also reports that her assets include a qualified blind trust as well as marital trusts with Blum.
The Postal Service owns more than 8,000 properties nationwide, including post offices, mail sorting facilities and area field offices, the Congressional Research Service reported two years ago. But the agency in recent years has considered major cutbacks including closing post offices in many small and rural areas and ending Saturday mail delivery, and is seeking to consolidate operations in the face of declining mail volume.
Currently USPS is advertising for sale 43 buildings and six parcels of land across the United States. In New York City, residents have protested the sale of the Bronx General Post Office, built in 1935 under the New Deal -- the 150,000-square-foot interior features 13 murals specially created for it.
In last month's alert, the IG warned that postal officials have ignored a long-standing real estate practice of separate agents representing buyers and sellers of property.
“Real estate transactions are normally negotiated by agents who stay at arm's length from each other’s interests,” the IG said. But when one company represents both parties to a sale, there are interwoven conflicts of interest that can “nullify the safeguards of arm’s-length transactions."
Besides avoiding conflicts of interest, having different representatives will help the Postal Service get as much profit as possible off property sales and reduce costs, the IG said.
The problem began in 2012 when postal service officials amended a contract with CBRE as its sole real estate agent company.
In its 2011 contract, CBRE represented only the "exclusive interests of the Postal Service." But USPS officials changed it the following year to allow the real estate agency to represent both the post office and buyers, asking the company disclose its relationship to a potential buyer.
Since then, CBRE has represented the postal service and buyers in seven sales, according to the IG. Prior to the 2012 change, the IG also found that “CBRE potentially violated the initial contract by representing both parties" in three other transactions.
"We do not believe allowing the [current] arrangement is in the Postal Service’s best interest,” the IG concluded.
Tom Samra, a Postal Service vice president, rejected that recommendation.
“By allowing dual agency arrangements, the Postal Service can obtain wider exposure to potential offerors, and thus ensure rigorous competition,” Samra said in a Feb. 3 letter to the IG. Elsewhere, he said, “it does not appear that any actual conflicts of interest have been found."
Despite warning of conflicts of interest, the IG's office may drop the matter.
Michael Magalski, the deputy assistant inspector general for support operations, stated in the alert he won't return to the issue in a forthcoming audit of the postal service's real estate transactions with CBRE.
Regarding the CBRE dual representation, Magalski said his office "does not plan to pursue it through the formal audit resolution process. The significant recommendation will be closed with the issuance of this report." The alert did not elaborate on why the issue would be closed.
UPDATE: Blum CBRE role is non-executive
A spokesman for CBRE offered the following additional comment in response to publication of today's story:
"Richard Blum is the non-executive Chairman of CBRE. As such, he plays no role in the day-to-day management of CBRE and was not even aware of the contract at the time it was awarded. He has had no involvement with our work for USPS, and derives no direct financial benefit from the contract. Mr. Blum's investment firm owns approximately 4-1/2% of the outstanding shares of CBRE Group, Inc."